What is offshore outsourcing?

A major reason for this is that offshore outsourcing can reduce labor costs, as labor rates in some countries may be lower than in the organization's home country. Offshore outsourcing can also provide access to a wider pool of skilled workers and specialized expertise that may not be available locally.

There are four main types of offshore outsourcing:

• Production offshoring. Also known as Business Process Outsourcing (BPO), this involves the actual relocation of the physical manufacturing process overseas, usually at a much lower cost in terms of labor and materials.

• Systems services offsourcing. IT services are typically done in countries like Asia, with a large pool of English speakers who are technically proficient workers.

• Innovation and software offshoring. Many high-tech product companies, like those in Silicon Valley, have started offshoring innovation work to countries such as Colombia, Belarus, South Africa, Mexico, and Ukraine. Accessing the highly-skilled talent pools in these countries offers significant cost savings and shorter production cycles.

• Reshoring. Also known as backshoring or inshoring, this is essentially offshoring that comes back. Companies like Google, Facebook, and Amazon, have been heavily criticized in European quarters for alleged concealment of income and tax avoidance by using low-tax havens like the Republic of Ireland to book non-US revenues from large advertisers through its Dublin unit.

Common examples of offshore outsourcing include software development, customer service, and manufacturing. Offshore outsourcing can involve a variety of business models, including hiring an individual freelancer, partnering with an offshore company, or setting up a subsidiary or branch office in the offshore location.

Offshore outsourcing can provide significant benefits to organizations, but it is important to carefully consider the potential risks and ensure that appropriate legal, security, and cultural considerations are taken into account.